8.27.2015 SEPA 51st State Webinar Complete Slides
Exploring the Energy Future: Highlights from the 51st State
Helping Utilities Make Smart Solar Decisions
Part I
Webinar FAQs • Recording & slides will be sent to all registered attendees within two business days. • Submit questions in the chat window at any time. • Questions will be answered following the presentations. Helping Utilities Make Smart Solar Decisions
Upcoming Events Upcoming Webinars September 3, 2015 · 2 PM, ET Exploring the Energy Future: Highlights from the 51st State – Part II Check www.solarelectricpower.org for updates!
SEPA Integration Workshop: Distributed Energy Resources and The Grid September 14, 2015 · 8 AM – 4:30 PM, PT Register today at www.solarpowerinternational.com/workshops Helping Utilities Make Smart Solar Decisions
Upcoming Events
Utility Night at the Ballpark Monday, September 14 · 7:30 PM – 9:30 PM, PT Register today at www.regonline.com/UtilityNight SEPA Solar Power Players Awards & Networking Luncheon Tuesday, September 15 · 11:50 AM – 12:50 PM, PT Register today at www.regonline.com/2015PowerPlayers
Helping Utilities Make Smart Solar Decisions
Speakers
Tanuj Deora (Moderator) EVP & CSO, SEPA
Jim Kennerly Principal Analyst, Sustainable Energy Advantage, LLC
Jan Ahlen Regulatory Advocate, NRECA
Michael O’Boyle Policy Analyst, Energy Innovation & America’s Power Plan
Karl Rabago Exec. Director, Pace Energy and Utilities Make Smart Solar Decisions Climate Center, PaceHelping Law School
Agenda The 51st State: A Cooperative Path to a Sustainable Future Jan Ahlen & Jay Morrison, NRECA An Adaptive Approach to Promote System Optimizations Michael O’Boyle, Energy Innovation & America’s Power Plan The Sharing Utility: Enabling and Rewarding Utility Performance, Service and Value in a Distributed Energy Age Karl Rabago, Pace Energy and Climate Center, Pace Law School Jim Kennerly, Sustainable Energy Advantage, LLC (formerly NC Clean Energy Technology Center, NC State University)
Helping Utilities Make Smart Solar Decisions
51st State Webinar Jan Ahlen National Rural Electric Cooperative Association August 27, 2015
Who are the Co-ops? Electric cooperatives are: • Private, independent, non-profit electric utility businesses • Owned by the customers they serve • Governed by a board of directors elected from the membership which sets policies and procedures that are implemented by the cooperatives’ management
Who are the Co-ops? Compared with other electric utilities: • Co-ops serve an average of 7.4 consumers per mile of line • Investor-owned utilities average 34 customers per mile of line
• Municipals average 48 consumers per mile
Cooperative Service Territory
Overview 1. Foundations of the 51st State 2. Current industry trends 3. Integrating DER
Foundations The 51st state should be designed to:
1. Promote safety, affordability, reliability, and environmental sustainability 2. Ensure that investments are not made in isolation 3. Meet the needs of consumers today and in the future
New and Cheaper Technologies
A New Market-Based Model? • Competitive Markets at the Retail Level: The Distribution System Operator (DSO) • New York’s Reforming the Energy Vision (REV) Goals of Market-Based Model:
1. Give consumers energy service options 2. Increase DER Penetration
The Co-op Model • Co-ops: the original DSO • Truly consumer-centric
• Looks at the entire system holistically to ensure reliability and affordability • Long-term thinking
Co-ops Integrating DER • Co-ops pursue DER in ways that meet member needs • Economic benefits remain in the local community
• Example: Co-op AMI penetration rates are highest in industry
Example: Okanogan County Electric Cooperative Df
OCEC Community Solar Project Launched in 2010 Fully subscribed within 2 weeks
Winthrop Community Solar Project Partnered with local non profit
Conclusion
Questions? Jan Ahlen [email protected]
AN ADAPTIVE APPROACH TO SYSTEM OPTIMIZATION Prepared for
MICHAEL O’BOYLE
19
www.americaspowerplan.com
20
WHAT IS SYSTEM OPTIMIZATION? Electricity system optimization means making the most effective use of a portfolio of electricity resources to maximize top public policy goals…
…delivering a system that is:
Reliable
Affordable Clean
21
The Adaptive Approach (re)examines fundamental principles of
RATE DESIGN
&
MARKET STRUCTURE
. . . to align customer behavior and utility incentives with outcomes that maximize the public interest
22
RATE DESIGN REINTERPRETING J.C. BONBRIGHT Bonbright’s principles of utility rates balance the same four goals . . .
• Utility revenue collection and capital attraction, • Limiting wasteful electricity consumption, • Fair distribution of system costs
• Simplicity and predictability
. . . But new technologies and public policies have changed the balance
23
FOUR NEW PRINCIPLES OF RATE DESIGN
1. To the extent possible, rates should reflect the real and social costs of service for each customer. 2. Rates should provide transparent, stable value propositions for all participants that provide energy services. 3. The retail rate structure should be adaptive, quickly responding to new social demands, new value opportunities, and new technologies. 4. Rates should meet customers at their level of sophistication and services required, taking energy management technology into account.
24
PRINCIPLES IN PRACTICE SMUD DYNAMIC PRICING PILOTS New resource from RMI – Economics of Demand Flexibility
25
MARKET STRUCTURE CHANGING UTILITY INCENTIVES
Align financial incentives of:
Utilities Customers IPPs 3rd party service providers
With the goals:
$
Reliable Affordable Clean …Other?? 26
EVERY STATE IS DIFFERENT…
27
INCENTING THE REGULATED UTILITY: PER FOR MAN CE -BASED R EGU L ATION
Policymakers
Regulators
Utilities
Outcomes
Already a standards
Retail Level, e.g.:
driven industry
• • • •
Reliable service Customer satisfaction Equity Innovative third-party services
Wholesale Level, e.g.:
Establish policy priorities
Work with regulators
Set quantitative performance goals
Meet goals
Establish reward & penalty structure
Receive rewards and/or penalties
• • • • •
System-wide least cost Resource diversity Effective facilitation of open access Environmental perf. Innovation 28
A NEW ROLE FOR THE DISTRIBUTION SYSTEM OPERATOR A state could choose to create a “distribution system optimizer”
This entity could be: A properly incented utility A nonprofit similar to (or a part of) the ISO/RTO Either way, an Integrated Distribution Plan can help
29
MARKET DESIGN FOR OPTIMIZATION
All resources should compete as equals to provide: Energy Capacity (if traded) Ancillary Services
Begin trading important services like: Flexibility Ramping
30
SEVERAL MARKET STRUCTURES CAN WORK, UNDER THESE PRINCIPLES 1. Create a level playing field for competition between all resources, to provide energy services. 2. Allow infrastructure owners and grid operators to capture a fair portion of the value of optimizing new technologies. 3. Foster innovation in energy services delivery by encouraging experimentation and allowing procurement to adapt quickly to technological innovation. 4. Maximize the transparency of energy procurement and markets.
31
ADDENDUM – WHO SHOULD OWN AND OPERATE DISTRIBUTED ENERGY RESOURCES? Operated to optimize Owned by: for:
Revenue sources:
Real-world examples: •
Utility
Utility operations
Commission-determined (rate-case), Wholesale markets
• •
•
Third party managers
Retail rates, Utility contracts, Wholesale markets
• •
Non-Utility • Customer’s bill
Retail rates •
California Solar PV Program Arizona rooftop solar Borrego Springs Microgrid
EcoFactor/NV Energy mPowered Program DR aggregation in PJM CAISO DER Provider Participation
ComEd Retail RealTime Pricing & DR program SMUD Dynamic Pricing Pilots
32
THANK YOU
[email protected] @oboylemm
www.americaspowerplan.com @USPowerPlan 33
The Sharing Utility: Enabling & Rewarding Utility Performance, Service & Value in a Distributed Energy Age Karl R. Rábago
Jim Kennerly
Executive Director, Pace Energy and Climate Center Co- Director, Northeast Solar Energy Market Coalition
Principal Analyst, Sustainable Energy Advantage, LLC (Former Sr. Policy Analyst, NC Clean Energy Technology Center NCSU College of Engineering)
About Sustainable Energy Advantage, LLC • Renewable energy consulting and advisory firm focused on the Northeast • Services include: renewable energy market, policy, financial & strategic analysis, due diligence • Recent engagements include: – – – –
MA Net Metering and Solar Task Force NY Large-Scale Renewables (LSR) Program Development RI Renewable Energy Growth Program Various consulting projects and subscription services for private clients
DISCLAIMER: This presentation reflects the results of best practices research conducted by the authors at NC State University and Pace University Law School. It is not intended to reflect the views of SEA or its clients.
51st State – The Sharing Utility
35
Utility Reform: Why now? Structural Challenges • The “shale boom” and cheap natural gas • Environmental compliance costs and growing expectations of environmental responsibility • Customer efficiency and price sensitivity (demand elasticity)
51st State – The Sharing Utility
36
Utility Reform: Why now? Challenges to Utility Growth • Generation capacity prices, costs, value • T&D investment recovery • Decreasing relevance of incentives (in selected markets) and increase in efficiency, conservation/load mgmt. • Controversy around efforts to buttress fixed cost recovery • Pressure on public benefit funds A situation ripe for disruption transformation! Pace/NCCETC 51st State – The Sharing Utility
37
The Alternative: A WellRegulated “Sharing Utility” • Allows customers to benefit more from utility investments – Systematic localized integrated resource planning – Transparent price and value information
• Operates against performance standards – – – – –
Short- & long-term prices Environmental responsibility Customer satisfaction Grid reliability & service quality Minimization of revenue requirement
• Expands 3d party participation – Vehicle for innovation – Decouple revenue from throughput – Leverage private market assets and solutions
51st State – The Sharing Utility
38
A Sharing Utility for a Sharing Economy “Collaborative Consumption” • “Collaborative consumption as a phenomenon is a class of economic arrangements in which participants share access to products or services, rather than having individual ownership.” • Collaborative consumption gives people the benefits of ownership with reduced personal burden and cost and also lower environmental impact—and it’s proving to be a compelling alternative to traditional forms of buying and ownership. – E.g. Uber, Airbnb, ZipCar, Yeloha/MySunBuddy (net metering credit sharing company)
51st State – The Sharing Utility
39
Perceptions & Beliefs • Utilities and IPPs – the forces of change are inevitable; the pace is uncertain. We are all in the same boat (relative competitive posture) • Non-solar/DER customers – growing bills, evaluating bypass, environmental concerns (I’m busy and stressed) • DER providers – utilities are shifting fixed costs, creating undesirable limits to growth at early market stages (We are just getting going – give us a chance) 51st State – The Sharing Utility
40
Perceptions & Beliefs (cont.) • Regulators – seeking a more resilient, decentralized system, bypass increases pressure on non-discretionary customers, failure to deal with issues accelerates the spiral. (Hate being in the middle of 2 good things – don’t force us to decide!) • Customer groups – rate and bill increases frustrating, lack of confidence in utility planning (Been there, don’t trust that!) • Legislators – like regulators, increasingly facing unsavory choices and conflicts (Generates contributions, but ultimately no-win decisions) 51st State – The Sharing Utility
41
Potential Pathways • • • •
“Maintain and harden” Incremental changes Comprehensive regulatory reform Legislative overhaul
51st State – The Sharing Utility
42
5 “Sharing Utility” Principles 1. 2.
3.
4.
5.
The full impact of electricity generation, delivery, and use on natural systems must be accounted for. Traditional cost-plus regulation should be largely replaced by value-based pricing of functionally unbundled services, remaining only for those services that continue to meet the definition of natural monopoly Every new regulated system asset has to prove its economic value to society, relative to alternatives, on a full life-cycle cost accounting basis Electricity pricing should offer customers a broader array of rate choices and reflect the full, location- and time-sensitive long-run marginal cost (LRMC) of utility service. Price structure need not mimic cost structure. Utilities should provide customers with full and fairly-priced access to solar and DER technologies, and services appropriate to their individual circumstances and their consumer (or “prosumer”) preferences
51st State – The Sharing Utility
43
1. Accounting for Impacts Externalities are real and markets are distorted and inefficient as a result of not accounting for them • Pricing carbon • Incorporating in value assign to DER • Flowing (some) carbon charge revenues back through bill reductions and infrastructure development 51st State – The Sharing Utility
44
2. Move from Cost to Value The Averch-Johnson Effect is a real and logical response to the ratemaking formula, that also applies to public power • Cost-plus regulation only for monopoly services • Allow deviation from dominance of averaged class rates – segmentation of customers • Use market mechanisms to internalize externalities through value-based rates • Open system platform for distribution services • The “DSP” serves as conduit for crediting of value and distribution of costs
51st State – The Sharing Utility
45
3. SLIRP, with Improvements • • • • • • •
Translate experience into value, not just rents Systematic Localized IRP Extend valuation methods to all DER Risk-adjusted discount rates Markets to assess value where possible, but with regulatory oversight Comprehensive functional unbundling Utility becomes load coordinator/manager; could be 3d party DSP participation only in non-competitive market segments 51st State – The Sharing Utility
46
4. Reflecting Cost • • • • •
Increasingly, short term elasticity is possible! Unbundling Customer segmentation Broad access to data Two-part rates Introduce temporal and locational sensitivities in rates (with gradualism in mind) 51st State – The Sharing Utility
47
5. Access to DER & Services There will be a residual, natural monopoly – but it should be constantly challenged by innovation • Utilities should develop DER programs to start, with an eye to competitive markets providing products and services wherever possible • Utilities transition to non-competitor platform provider as competitive markets emerge 51st State – The Sharing Utility
48
What PACE/NESEMC are doing • Leadership is convening people around a common agenda • Pace Energy and Climate Center – Public interest intervenor – Stakeholder participant – Convener
• Clean Energy Organizations Coalition • NESEMC – regional solar businesses
49
What Others are Already Doing • • • • • • • •
Community and shared solar Combined heat and power District heating and cooling Demand response Community Choice Aggregation Solar Rooftop Leasing Community Storage V2G – Vehicle to Grid 51st State – The Sharing Utility
50
Conclusion: A Well-Regulated Sharing Utility • Shifts market surplus downstream to customers – Local integrated resource planning – Transparent price and value information
• Operates against performance standards – – – – –
Short- & long-term prices Environmental responsibility Customer satisfaction Grid reliability & service quality Minimization of revenue requirement
• Expands 3d party participation – Decouple revenue from throughput – Leverage private market assets and solutions
51st State – The Sharing Utility
51
Thank you! Karl R. Rábago Executive Director Pace Energy and Climate Center Co-Director, Northeast Solar Energy Market Coalition [email protected] (914) 422-4082
Jim Kennerly Principal Analyst Sustainable Energy Advantage, LLC [email protected] (508) 665-5862
Pace Energy and Climate Center energy.pace.edu Sustainable Energy Advantage, LLC seadvantage.com 51st State – The Sharing Utility
52
Q&A
Tanuj Deora (Moderator) EVP/CSO, SEPA
Jim Kennerly Principal Analyst, Sustainable Energy Advantage, LLC
Jan Ahlen Regulatory Advocate, NRECA
Michael O’Boyle Policy Analyst, Energy Innovation & America’s Power Plan
Karl Rabago Exec. Director, Pace Energy and Utilities Make Smart Solar Decisions Climate Center, PaceHelping Law School
Project Feedback Contact SEPA at any time for project clarification, questions, or suggestions: John Sterling [email protected] 202-559-2022 Press inquiries: Bob Gibson [email protected] 202-280-1556 Helping Utilities Make Smart Solar Decisions
Helping Utilities Make Smart Solar Decisions
Part I
Webinar FAQs • Recording & slides will be sent to all registered attendees within two business days. • Submit questions in the chat window at any time. • Questions will be answered following the presentations. Helping Utilities Make Smart Solar Decisions
Upcoming Events Upcoming Webinars September 3, 2015 · 2 PM, ET Exploring the Energy Future: Highlights from the 51st State – Part II Check www.solarelectricpower.org for updates!
SEPA Integration Workshop: Distributed Energy Resources and The Grid September 14, 2015 · 8 AM – 4:30 PM, PT Register today at www.solarpowerinternational.com/workshops Helping Utilities Make Smart Solar Decisions
Upcoming Events
Utility Night at the Ballpark Monday, September 14 · 7:30 PM – 9:30 PM, PT Register today at www.regonline.com/UtilityNight SEPA Solar Power Players Awards & Networking Luncheon Tuesday, September 15 · 11:50 AM – 12:50 PM, PT Register today at www.regonline.com/2015PowerPlayers
Helping Utilities Make Smart Solar Decisions
Speakers
Tanuj Deora (Moderator) EVP & CSO, SEPA
Jim Kennerly Principal Analyst, Sustainable Energy Advantage, LLC
Jan Ahlen Regulatory Advocate, NRECA
Michael O’Boyle Policy Analyst, Energy Innovation & America’s Power Plan
Karl Rabago Exec. Director, Pace Energy and Utilities Make Smart Solar Decisions Climate Center, PaceHelping Law School
Agenda The 51st State: A Cooperative Path to a Sustainable Future Jan Ahlen & Jay Morrison, NRECA An Adaptive Approach to Promote System Optimizations Michael O’Boyle, Energy Innovation & America’s Power Plan The Sharing Utility: Enabling and Rewarding Utility Performance, Service and Value in a Distributed Energy Age Karl Rabago, Pace Energy and Climate Center, Pace Law School Jim Kennerly, Sustainable Energy Advantage, LLC (formerly NC Clean Energy Technology Center, NC State University)
Helping Utilities Make Smart Solar Decisions
51st State Webinar Jan Ahlen National Rural Electric Cooperative Association August 27, 2015
Who are the Co-ops? Electric cooperatives are: • Private, independent, non-profit electric utility businesses • Owned by the customers they serve • Governed by a board of directors elected from the membership which sets policies and procedures that are implemented by the cooperatives’ management
Who are the Co-ops? Compared with other electric utilities: • Co-ops serve an average of 7.4 consumers per mile of line • Investor-owned utilities average 34 customers per mile of line
• Municipals average 48 consumers per mile
Cooperative Service Territory
Overview 1. Foundations of the 51st State 2. Current industry trends 3. Integrating DER
Foundations The 51st state should be designed to:
1. Promote safety, affordability, reliability, and environmental sustainability 2. Ensure that investments are not made in isolation 3. Meet the needs of consumers today and in the future
New and Cheaper Technologies
A New Market-Based Model? • Competitive Markets at the Retail Level: The Distribution System Operator (DSO) • New York’s Reforming the Energy Vision (REV) Goals of Market-Based Model:
1. Give consumers energy service options 2. Increase DER Penetration
The Co-op Model • Co-ops: the original DSO • Truly consumer-centric
• Looks at the entire system holistically to ensure reliability and affordability • Long-term thinking
Co-ops Integrating DER • Co-ops pursue DER in ways that meet member needs • Economic benefits remain in the local community
• Example: Co-op AMI penetration rates are highest in industry
Example: Okanogan County Electric Cooperative Df
OCEC Community Solar Project Launched in 2010 Fully subscribed within 2 weeks
Winthrop Community Solar Project Partnered with local non profit
Conclusion
Questions? Jan Ahlen [email protected]
AN ADAPTIVE APPROACH TO SYSTEM OPTIMIZATION Prepared for
MICHAEL O’BOYLE
19
www.americaspowerplan.com
20
WHAT IS SYSTEM OPTIMIZATION? Electricity system optimization means making the most effective use of a portfolio of electricity resources to maximize top public policy goals…
…delivering a system that is:
Reliable
Affordable Clean
21
The Adaptive Approach (re)examines fundamental principles of
RATE DESIGN
&
MARKET STRUCTURE
. . . to align customer behavior and utility incentives with outcomes that maximize the public interest
22
RATE DESIGN REINTERPRETING J.C. BONBRIGHT Bonbright’s principles of utility rates balance the same four goals . . .
• Utility revenue collection and capital attraction, • Limiting wasteful electricity consumption, • Fair distribution of system costs
• Simplicity and predictability
. . . But new technologies and public policies have changed the balance
23
FOUR NEW PRINCIPLES OF RATE DESIGN
1. To the extent possible, rates should reflect the real and social costs of service for each customer. 2. Rates should provide transparent, stable value propositions for all participants that provide energy services. 3. The retail rate structure should be adaptive, quickly responding to new social demands, new value opportunities, and new technologies. 4. Rates should meet customers at their level of sophistication and services required, taking energy management technology into account.
24
PRINCIPLES IN PRACTICE SMUD DYNAMIC PRICING PILOTS New resource from RMI – Economics of Demand Flexibility
25
MARKET STRUCTURE CHANGING UTILITY INCENTIVES
Align financial incentives of:
Utilities Customers IPPs 3rd party service providers
With the goals:
$
Reliable Affordable Clean …Other?? 26
EVERY STATE IS DIFFERENT…
27
INCENTING THE REGULATED UTILITY: PER FOR MAN CE -BASED R EGU L ATION
Policymakers
Regulators
Utilities
Outcomes
Already a standards
Retail Level, e.g.:
driven industry
• • • •
Reliable service Customer satisfaction Equity Innovative third-party services
Wholesale Level, e.g.:
Establish policy priorities
Work with regulators
Set quantitative performance goals
Meet goals
Establish reward & penalty structure
Receive rewards and/or penalties
• • • • •
System-wide least cost Resource diversity Effective facilitation of open access Environmental perf. Innovation 28
A NEW ROLE FOR THE DISTRIBUTION SYSTEM OPERATOR A state could choose to create a “distribution system optimizer”
This entity could be: A properly incented utility A nonprofit similar to (or a part of) the ISO/RTO Either way, an Integrated Distribution Plan can help
29
MARKET DESIGN FOR OPTIMIZATION
All resources should compete as equals to provide: Energy Capacity (if traded) Ancillary Services
Begin trading important services like: Flexibility Ramping
30
SEVERAL MARKET STRUCTURES CAN WORK, UNDER THESE PRINCIPLES 1. Create a level playing field for competition between all resources, to provide energy services. 2. Allow infrastructure owners and grid operators to capture a fair portion of the value of optimizing new technologies. 3. Foster innovation in energy services delivery by encouraging experimentation and allowing procurement to adapt quickly to technological innovation. 4. Maximize the transparency of energy procurement and markets.
31
ADDENDUM – WHO SHOULD OWN AND OPERATE DISTRIBUTED ENERGY RESOURCES? Operated to optimize Owned by: for:
Revenue sources:
Real-world examples: •
Utility
Utility operations
Commission-determined (rate-case), Wholesale markets
• •
•
Third party managers
Retail rates, Utility contracts, Wholesale markets
• •
Non-Utility • Customer’s bill
Retail rates •
California Solar PV Program Arizona rooftop solar Borrego Springs Microgrid
EcoFactor/NV Energy mPowered Program DR aggregation in PJM CAISO DER Provider Participation
ComEd Retail RealTime Pricing & DR program SMUD Dynamic Pricing Pilots
32
THANK YOU
[email protected] @oboylemm
www.americaspowerplan.com @USPowerPlan 33
The Sharing Utility: Enabling & Rewarding Utility Performance, Service & Value in a Distributed Energy Age Karl R. Rábago
Jim Kennerly
Executive Director, Pace Energy and Climate Center Co- Director, Northeast Solar Energy Market Coalition
Principal Analyst, Sustainable Energy Advantage, LLC (Former Sr. Policy Analyst, NC Clean Energy Technology Center NCSU College of Engineering)
About Sustainable Energy Advantage, LLC • Renewable energy consulting and advisory firm focused on the Northeast • Services include: renewable energy market, policy, financial & strategic analysis, due diligence • Recent engagements include: – – – –
MA Net Metering and Solar Task Force NY Large-Scale Renewables (LSR) Program Development RI Renewable Energy Growth Program Various consulting projects and subscription services for private clients
DISCLAIMER: This presentation reflects the results of best practices research conducted by the authors at NC State University and Pace University Law School. It is not intended to reflect the views of SEA or its clients.
51st State – The Sharing Utility
35
Utility Reform: Why now? Structural Challenges • The “shale boom” and cheap natural gas • Environmental compliance costs and growing expectations of environmental responsibility • Customer efficiency and price sensitivity (demand elasticity)
51st State – The Sharing Utility
36
Utility Reform: Why now? Challenges to Utility Growth • Generation capacity prices, costs, value • T&D investment recovery • Decreasing relevance of incentives (in selected markets) and increase in efficiency, conservation/load mgmt. • Controversy around efforts to buttress fixed cost recovery • Pressure on public benefit funds A situation ripe for disruption transformation! Pace/NCCETC 51st State – The Sharing Utility
37
The Alternative: A WellRegulated “Sharing Utility” • Allows customers to benefit more from utility investments – Systematic localized integrated resource planning – Transparent price and value information
• Operates against performance standards – – – – –
Short- & long-term prices Environmental responsibility Customer satisfaction Grid reliability & service quality Minimization of revenue requirement
• Expands 3d party participation – Vehicle for innovation – Decouple revenue from throughput – Leverage private market assets and solutions
51st State – The Sharing Utility
38
A Sharing Utility for a Sharing Economy “Collaborative Consumption” • “Collaborative consumption as a phenomenon is a class of economic arrangements in which participants share access to products or services, rather than having individual ownership.” • Collaborative consumption gives people the benefits of ownership with reduced personal burden and cost and also lower environmental impact—and it’s proving to be a compelling alternative to traditional forms of buying and ownership. – E.g. Uber, Airbnb, ZipCar, Yeloha/MySunBuddy (net metering credit sharing company)
51st State – The Sharing Utility
39
Perceptions & Beliefs • Utilities and IPPs – the forces of change are inevitable; the pace is uncertain. We are all in the same boat (relative competitive posture) • Non-solar/DER customers – growing bills, evaluating bypass, environmental concerns (I’m busy and stressed) • DER providers – utilities are shifting fixed costs, creating undesirable limits to growth at early market stages (We are just getting going – give us a chance) 51st State – The Sharing Utility
40
Perceptions & Beliefs (cont.) • Regulators – seeking a more resilient, decentralized system, bypass increases pressure on non-discretionary customers, failure to deal with issues accelerates the spiral. (Hate being in the middle of 2 good things – don’t force us to decide!) • Customer groups – rate and bill increases frustrating, lack of confidence in utility planning (Been there, don’t trust that!) • Legislators – like regulators, increasingly facing unsavory choices and conflicts (Generates contributions, but ultimately no-win decisions) 51st State – The Sharing Utility
41
Potential Pathways • • • •
“Maintain and harden” Incremental changes Comprehensive regulatory reform Legislative overhaul
51st State – The Sharing Utility
42
5 “Sharing Utility” Principles 1. 2.
3.
4.
5.
The full impact of electricity generation, delivery, and use on natural systems must be accounted for. Traditional cost-plus regulation should be largely replaced by value-based pricing of functionally unbundled services, remaining only for those services that continue to meet the definition of natural monopoly Every new regulated system asset has to prove its economic value to society, relative to alternatives, on a full life-cycle cost accounting basis Electricity pricing should offer customers a broader array of rate choices and reflect the full, location- and time-sensitive long-run marginal cost (LRMC) of utility service. Price structure need not mimic cost structure. Utilities should provide customers with full and fairly-priced access to solar and DER technologies, and services appropriate to their individual circumstances and their consumer (or “prosumer”) preferences
51st State – The Sharing Utility
43
1. Accounting for Impacts Externalities are real and markets are distorted and inefficient as a result of not accounting for them • Pricing carbon • Incorporating in value assign to DER • Flowing (some) carbon charge revenues back through bill reductions and infrastructure development 51st State – The Sharing Utility
44
2. Move from Cost to Value The Averch-Johnson Effect is a real and logical response to the ratemaking formula, that also applies to public power • Cost-plus regulation only for monopoly services • Allow deviation from dominance of averaged class rates – segmentation of customers • Use market mechanisms to internalize externalities through value-based rates • Open system platform for distribution services • The “DSP” serves as conduit for crediting of value and distribution of costs
51st State – The Sharing Utility
45
3. SLIRP, with Improvements • • • • • • •
Translate experience into value, not just rents Systematic Localized IRP Extend valuation methods to all DER Risk-adjusted discount rates Markets to assess value where possible, but with regulatory oversight Comprehensive functional unbundling Utility becomes load coordinator/manager; could be 3d party DSP participation only in non-competitive market segments 51st State – The Sharing Utility
46
4. Reflecting Cost • • • • •
Increasingly, short term elasticity is possible! Unbundling Customer segmentation Broad access to data Two-part rates Introduce temporal and locational sensitivities in rates (with gradualism in mind) 51st State – The Sharing Utility
47
5. Access to DER & Services There will be a residual, natural monopoly – but it should be constantly challenged by innovation • Utilities should develop DER programs to start, with an eye to competitive markets providing products and services wherever possible • Utilities transition to non-competitor platform provider as competitive markets emerge 51st State – The Sharing Utility
48
What PACE/NESEMC are doing • Leadership is convening people around a common agenda • Pace Energy and Climate Center – Public interest intervenor – Stakeholder participant – Convener
• Clean Energy Organizations Coalition • NESEMC – regional solar businesses
49
What Others are Already Doing • • • • • • • •
Community and shared solar Combined heat and power District heating and cooling Demand response Community Choice Aggregation Solar Rooftop Leasing Community Storage V2G – Vehicle to Grid 51st State – The Sharing Utility
50
Conclusion: A Well-Regulated Sharing Utility • Shifts market surplus downstream to customers – Local integrated resource planning – Transparent price and value information
• Operates against performance standards – – – – –
Short- & long-term prices Environmental responsibility Customer satisfaction Grid reliability & service quality Minimization of revenue requirement
• Expands 3d party participation – Decouple revenue from throughput – Leverage private market assets and solutions
51st State – The Sharing Utility
51
Thank you! Karl R. Rábago Executive Director Pace Energy and Climate Center Co-Director, Northeast Solar Energy Market Coalition [email protected] (914) 422-4082
Jim Kennerly Principal Analyst Sustainable Energy Advantage, LLC [email protected] (508) 665-5862
Pace Energy and Climate Center energy.pace.edu Sustainable Energy Advantage, LLC seadvantage.com 51st State – The Sharing Utility
52
Q&A
Tanuj Deora (Moderator) EVP/CSO, SEPA
Jim Kennerly Principal Analyst, Sustainable Energy Advantage, LLC
Jan Ahlen Regulatory Advocate, NRECA
Michael O’Boyle Policy Analyst, Energy Innovation & America’s Power Plan
Karl Rabago Exec. Director, Pace Energy and Utilities Make Smart Solar Decisions Climate Center, PaceHelping Law School
Project Feedback Contact SEPA at any time for project clarification, questions, or suggestions: John Sterling [email protected] 202-559-2022 Press inquiries: Bob Gibson [email protected] 202-280-1556 Helping Utilities Make Smart Solar Decisions
